Company audit standards 'disappointing'

The corporate watchdog has slammed the audit industry, saying almost a fifth of reports were deficient.

The Australian Securities and Investments Commission conducted an 18-month audit of auditors, and described the results as "disappointing".

ASIC found, of the 20 companies it inspected, 18 per cent of the 602 audit areas reviewed did not perform all the procedures necessary to reasonably ensure that the financial report being audited was not materially misstated.

The watchdog says that is significantly worse than the 14 per cent it recorded in its investigation during the previous 18 months.

ASIC's chairman, Greg Medcraft, says the results simply are not good enough for an industry relied on by everyone else involved in financial markets or corporate transactions.

"Auditors are gatekeepers that play a critical role in ensuring that Australian investors can be confident and informed," he noted in the report."

"These results are disappointing. Audit firms need to increase their efforts to improve audit quality and the consistency of audit execution."

ASIC says auditors need to obtain more evidence of companies' financial position, exercise a higher degree of scepticism about information provided by the audited company, and reduce their reliance on the work of other auditors and experts.